This time it’s not the shekel’s “fault.” The dollar was down in early trading Tuesday morning by an additional 17 percent, after falling 0.77 percent on Monday — a fall of nearly 1 percent in one trading day this week. The weakness of the dollar reflected the greenback’s weakness all over the world, hitting a four-month low against the euro — and trading at nearly parity, with the one euro costing $1.035 at the close of business Monday. The fall was seen as part of the expression of investor nervousness over the failure of the administration of President Donald Trump to push through much of his agenda, including changes to the American Health-Care Act.
In Israel, the dollar opened at NIS 3.609/dollar, the greenback’s lowest level since September 2014. Since the beginning of the year, the dollar has sunk 6 percent versus the shekel. The NIS 3.60/dollar level is seen as an important psychological barrier, and foreign currency experts expect a massive intervention by the Bank of Israel to keep the dollar above that level, at least for Tuesday.
The question among most professionals is how long the Bank will be able — or willing — to keep its policy up, given the strength of the Israeli economy. As the chief objective of Bank of Israel intervention in recent years has been to maintain a relatively high shekel/dollar rate in order to ensure that Israeli goods and services were competitive on the international market, the strong surge in the economic numbers has led to speculation that the Bank of Israel will reset its “floor,” and allow the shekel to strengthen — perhaps significantly — before it intervenes to support the shekel by buying up excess dollars.
The Bank of Israel already has over $100 billion in reserves, much of it acquired over the past several years as a result of buying up dollars to keep the shekel’s rate artificially high. Given the strong performance of the economy and of exports — even during a period when the shekel is relatively low against the dollar in historic terms — investors are speculating that the Bank could set a new “low” for the shekel, above which it may not intervene to buy dollars.